Popular Indian exchanges such as Zebpay, Unocoin, WazirX, and Koinex have now shifted their business models to become crypto-to-crypto exchanges, competing directly against international giants like Binance.
The problem with this model is that it largely only serves the needs of existing cryptocurrency investors, while leaving those who are eager to get into the market with fewer options.
When the Reserve Bank of India (RBI) decided to crack down on cryptocurrency exchanges back in April of this year, it sent shockwaves through the industry. The ban issued by the central bank required all commercial banks to end their relationship with crypto exchanges, effectively forcing the exchanges to shut down fiat-to-crypto trading in the country.
Some exchanges have attempted to circumvent the banking ban by introducing peer-to-peer trading, where the exchange merely functions as an escrow service for direct transactions between users, as reported.
The chief executive of WazirX, a crypto exchange that plans on pursuing this model, explained this to the Economic Times of India by saying: “If banking is something the exchanges are not allowed to do, then the solution is that direct banking doesn’t come in.”
However, there are signs that this is may not work as smoothly as one may think. In a recent interview with Quartz India, co-founder of Coindelta, another Indian crypto exchange, explained that even though the peer-to-peer transactions are carried out online, there are risks involved.
“[…] even when it was online, you didn’t know who you were dealing with and there were chances that the deal could go awry,” he was quoted as saying.
In the same article, Praveen Kumar, CEO of Belfrics Global, a Malaysian exchange with a presence in India, voiced skepticism over whether the industry could survive by only facilitating crypto-to-crypto trading, saying “there are measures that we are taking in the meantime, but for the industry to survive and thrive, fiat transactions need to be allowed.”
However, India’s top court refused to overturn a ban by the (RBI) on lenders from dealing in cryptocurrencies. This move effectively outlaws cryptocurrencies in the country, which represents the third largest economy in Asia, as reported.
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Author: Fredrik Vold
Image Credit: iStock/Andrea Zangrilli